AmCham CZ: Trump Administration considers steel and aluminum tariffs

The US government is considering imposing tariffs of 25% on steel and 10% on aluminum imports, and the European Union announced it is prepared to respond with tariffs on US imports with the same monetary value as EU exports of steel and aluminum. Other countries, including the largest steel and aluminum exporter to the US, Canada, have also declared their intention to reciprocate. China, the main target of the tariff, has not reacted explicitly.

The US government is considering imposing tariffs of 25% on steel and 10% on aluminum imports, and the European Union announced it is prepared to respond with tariffs on US imports with the same monetary value as EU exports of steel and aluminum. Other countries, including the largest steel and aluminum exporter to the US, Canada, have also declared their intention to reciprocate. China, the main target of the tariff, has not reacted explicitly.

US Reaction

Over the weekend, the two officials most responsible for crafting and implementing trade policy, Secretary of Commerce Wilbur Ross and Director of Trade and Industrial Policy Peter Navarro, left open the possibility that the administration would change its position. Navarro also indicated that the implementation of the tariffs might not occur immediately and that companies- but not countries- could apply for an exemption.

The Defense Department stated "the systemic use of unfair trade practices to intentionally erode our innovation and manufacturing industrial base poses a risk to our national security." The Department, however, also "continues to be concerned about the negative impact on our key allies regarding the recommended options within the reports" and stated "targeted tariffs are more preferable than a global quota or global tariff."

US Speaker of the House Paul Ryan, whose congressional district would be targeted by EU sanctions (see below), said he is extremely worried that the White House might be initiating a trade war. An influential member of the US House of Representatives, Chairman of the Ways and Means Committee Kevin Brady suggested that all steel and aluminum from Nafta partners Canada and Mexico should be exempted. Brady also said that exemptions for other countries which trade fairly should be considered as well.

The American Chamber of Commerce for the EU said it shared "the US government’s concerns regarding global overcapacity of steel and aluminum" but believed "this decision would unfairly target European manufacturers and would not address Chinese excess capacity."

EU Reaction

The EU Commission has developed a list of goods to target with reciprocal tariffs. These goods include Harley Davidson motorcycles, produced in Speaker Ryan's district, and bourbon, produced in the home state of Senate Majority Leader Mitch McConnell. This targeting is seen as a tactic to pressure the Administration to exempt the EU from the tariff or drop the proposal altogether.

The Czech Ministry of Industry and Trade raised their concerns with AmCham two weeks ago. The AmCham has presented those concerns to the US Chamber in Washington.

What happens next?

Some pundits speculate that President Trump announced his intention to impose tariffs as a political move to support a Republican congressional candidate who is in a statistical tie with his Democratic opponent in the March 13th special election for Pennsylvania district 18. The district has been a center for the steel industry and a Republican stronghold, which President Trump won by 20%. A loss in that district would be ominous for Republican chances for victory in the upcoming mid-term elections, according to Bloomberg and other media outlets.

For that reason, any changes to what the President announced will likely occur after March 13th. The emerging consensus within the government, Congress and business community that any tariff should be targeted at unfair trade is increasing the odds that the final result will be tailored more tightly to address Chinese overproduction, and exclude the EU.